A report from Aaron Layman in Texas. “It’s pretty amazing to see the Powell Fed stand by while the housing market bubbles over. The median price of a Denton home soared 34.8% from the same time a year ago to $398,000. Spiraling housing costs have taken the median monthly housing payment for a Denton County homebuyer from roughly $1,800 per month at the start of 2021 to nearly $3,000 per month with the recent spike in prices and mortgage rates. This is assuming a generous 20% down payment. For buyers who have little to no down payment, monthly housing costs are even more expensive.”
“The Powell Fed spent the last two years enriching existing asset owners with trillions in trickle-down liquidity. They now seem surprised that inflation has turned into a major problem. Not the brightest bunch, apparently.This is probably a good time to remind you that the annual salary expense for the Federal Reserve system was nearly $2.5 billion in 2020. How many Ph.D. economists does it take to change a light bulb? The Fed probably has a paper on that somewhere. There are many Fed staffers who have never held a job outside of the Federal Reserve system. What you get as a result is inbred groupthink and monetary policy that is consistently wrong.”
From NBC San Diego in California. “‘So normally we would see house prices come down because, you know, higher interest rates mean that, you know, becomes more expensive to service a mortgage would normally dampen demand,’ UCSD Professor Allan Timmermann said ‘A typical household now costs about $500 more to service each month, and so that combined with the fact that gasoline prices and, you know, people’s grocery shopping trips, that everything is becoming more expensive, inflation is affecting everybody. I mean, almost $1 million for the average house in san Diego. That makes it extraordinarily hard. You can see those households are going to be hit on all sides — higher costs of entering into the market, higher cost of living because of inflation. So, it’s a really unfortunate, very stressful situation also with the future interest rate increases of the Federal Reserve.’”
The Tampa Bay Times. “‘Florida’s coast] is most exposed to dramatic swings. These communities are the canary in the coal mine,’ said Florida Atlantic University economist Ken H. Johnson. ‘They will show signs of whatever’s going to happen and it’s going to happen there first.’ ‘It’s the top of the market for sure, but no one knows when the music will stop,’ said Tampa native Patrick Carroll, CEO of Carroll, a real estate investing firm.”
“‘Florida’s economy is built on tourism and [population] growth,’ said Tampa Bay historian Rodney Kite-Powell. ‘When it’s not growing, it hurts everybody. Each market cycle offers up a new lesson, said Kite-Powell. Florida is going through a rapid upswing again. Only time will tell if history will repeat itself. ‘There are lessons that have been learned,’ he said. ‘But we’re still making a lot of the same mistakes.’”
From Tech Crunch. “Digital mortgage company Better.com has conducted its thrid mass layoff in less than five months, citing a declining mortgage market, according to an email to employees seen by TechCrunch.”
From Investor Place. “Home Depot stock has been taken to the woodshed. Shares of the leading building materials retailer have slumped 27% from their 52-week highs. This comes as investors react to rapidly rising interest rates. The bottom line on HD stock is that it is already priced for the upcoming housing bust.”
From CNBC. “An auction can act as a metaphorical real-estate guillotine, slicing inflated asking prices in half or worse, according to a CNBC review of recent sales. The three highest-priced homes ever to sell at auction each came up for sale in the past 14 months. And while each transaction carried an eye-popping final bid, the three mansions saw their original asking prices slashed by 70% on average — leaving a combined $600 million on the table.”
“Dr. Alex Khadavi, a celebrity skin doctor in Los Angeles, was hoping for a quick sale and big payday when he finally completed a 21,000-square-foot mansion that took seven years and tens of millions of dollars to develop. But a little over a year since he listed it for sale the doctor’s dreams of cashing out are being crushed by a mountain of debt, unpaid contractor bills, bankruptcy court proceedings and trouble with the law. Now he’s running low on luck, money and time. ‘I can’t carry the cost. I had to do what I had to do,’ he said.”
The Boston Globe in Massachusetts. “A boom in the region’s massive biotech cluster continues unabated. But the stock market paints a different picture of an industry that is a linchpin of the Massachusetts economy.For more than a year, US biotech stocks have been down overall, some by up to 80 or 90 percent. ‘It is arguably the worst slump in the space relative to the S&P that we have ever seen,’ said Andre Perold, cofounder of the Boston investment firm HighVista Strategies. Stock prices of many early-stage biotechs are trading for a fraction of their former worth. ‘Some of these biotech firms will not survive. They won’t be able to raise money, or if they do, it will be very diluted.’”
“Over the past two months, Boston companies announcingplans to shrink their workforces by 30 to 60 percent include Akebia Therapeutics, Bluebird Bio, and Yumanity Therapeutics. Earlier this month, the microbiome firm Kaleido Biosciences shut down altogether. ‘During the good times, companies were kind of valued as exciting ideas, and today, when things are bad, they are being valued as actual businesses,’ said Brad Loncar, chief executive of Loncar Investments. ‘There are a lot of companies that don’t deserve to be public and never did, and those companies will go away.’”
The Globe and Mail. “The Canadian real estate industry is gearing up to fight Ottawa’s plan to ban a common home selling practice known as blind bidding. During last year’s real estate frenzy, some economists and even some realtors called for an end to blind bidding, saying it contributed to skyrocketing home prices. Now that borrowing has become more expensive, buyer demand has started to wane. Realtors have described homes taking longer to sell and say some are getting no offers, which used to be rare.”
From Radio New Zealand. “Property developers are cutting their asking prices by tens of thousands of dollars as they try to entice buyers amid a slowing market. Lawyer Joanna Pidgeon, from Pidgeon Judd, said the market was getting tougher for developers. ‘We are seeing some smaller developers on-sell. They may have bought at a premium but they’re looking to because they can’t get their pre-sales. So they’re having to cut their losses and move on.’”
“Pidgeon said banks were also asking developers to limit opportunities for buyers to walk away. ‘So we’ve seen some developers’ banks are requiring them to get their sunset clauses date pushed out so purchasers cannot pull out for non-fulfillment.’ Only six months ago, RNZ reported on developers deliberately delaying projects in order to boot out their buyer via a sunset clause – then resell for a higher price.”
From Yicai Global. “E-House Enterprise Holdings has defaulted on a US dollar bond worth USD300 million, China’s largest real estate service provider said, adding that so far creditors are not chasing advance payment of its 2023 notes. E-House, which counts e-commerce giant Alibaba Group Holding as its second largest shareholder, has failed to repay a US dollar bond due this month with a balance of USD300 million, the firm said on April 18. The bond was issued in October 2019 at a coupon rate of 7.625 percent. Last year its losses outstripped revenue at CNY8.89 billion (USD14 billion) compared to CNY8.84 billion, according to its latest earnings report.”
“There has been a string of defaults in the real estate sector in the past year because of the impact of tighter regulation, financing difficulties and a cooling real estate market. Yango Group warned in February that it is in danger of defaulting on debt, Kaisa Group was unable to repay CNY300 million (USD46.9 million) of wealth management products in November last year, China Evergrande Group missed a bond payment last December, to name a few.”
From Reuters. “Home owners in small Chinese cities are battling a rare property market downdraft as buyers keep away, eroding the wealth of millions in a blow to already brittle consumer confidence in the world’s second-largest economy. Home owners with mortgages or those facing uncertain job prospects have already started to rein in spending. ‘I’d think twice before buying anything now,’ said a home owner surnamed Shi in Langfang, a tier-three city in Hebei province just south of Beijing. ‘We’re also not travelling, not even visiting our parents in my hometown.’”
“Shi, who owns a hair salon, bought her home a few years ago, and has been hit by falling valuations even as her monthly mortgage payments remained unchanged. ‘I worry about my mortgage because the city has been under lockdown for a long time, and (my income) is in the negative and business is bad,’ she said.”
“A delivery truck driver surnamed Sun, 36, said the value of a home he bought in Linyi, a tier-three city in Shandong province, had fallen since 2021 while his mortgage payment rate was still tied to the original valuation. ‘I really don’t want this property anymore, I don’t want to suffer,’ said Sun, who is married with two children. He has stopped buying new clothing and even cut back on cigarettes.”
“In recent days, social media posts with the hastag ‘postponing mortgage payments’ had been viewed by over 60 million people on China’s microblog Weibo. As of end-January, inventories of new homes in 66 tier-three and tier-four cities stood at 270.39 million square metres with a destocking cycle of 21.09 months, said China Real Estate Information Corp, an independent property consultancy service. That compared with 37 million square meters in four tier-one cities with a destocking period of 11.33 months. ‘Confidence in those (lower-tier) markets is gone,’ said Zhang Dawei, chief analyst at property agency Centaline. ‘No one dares to buy a home.’”